Executive Summary / Key Takeaways

• Relay Therapeutics is a clinical-stage precision medicine company built on the Dynamo platform, a computational drug discovery engine that has produced RLY-2608, the first known allosteric, pan-mutant, isoform-selective PI3Kα inhibitor in clinical development, but the company remains years away from commercialization and has accumulated a $2 billion deficit since its 2015 founding.

• The company faces a critical cash runway equation: $596.4 million in cash as of September 2025 supports operations into 2029 at current burn rates, but this assumes no clinical setbacks, no competitive delays, and no need for expensive commercial infrastructure that peers like Blueprint Medicines (BPMC) and Incyte (INCY) already possess.

• Recent strategic repositioning reveals management's focus: terminating the Genentech collaboration on migoprotafib, licensing RLY-4008 to Elevar for non-dilutive funding, and restructuring operations by cutting 70+ employees and reducing lab space—all designed to conserve cash for the Phase 3 ReDiscover-2 trial of RLY-2608 in advanced breast cancer.

• RLY-2608's interim data showing 10.3-month median progression-free survival and a well-tolerated safety profile positions it as potentially superior to existing PI3Kα inhibitors, but the company must execute a global registrational study against capivasertib while competing against Incyte's established Pemigatinib and Blueprint Medicines' commercial infrastructure in the FGFR space.

• The investment thesis hinges on two variables: whether RLY-2608's Phase 3 data can support regulatory approval and market penetration before cash depletion, and whether the Dynamo platform can generate additional clinical-stage assets without the computational power of the now-ended D.E. Shaw collaboration that was central to its discovery advantage.

Setting the Scene: A Platform in Search of a Product

Relay Therapeutics, incorporated in Delaware in May 2015, began as Allostery, Inc. before rebranding later that year. The company positioned itself as a clinical-stage precision medicine company aiming to transform drug discovery by integrating computational and experimental technologies through its Dynamo platform, with an initial focus on targeted oncology and genetic disease indications. This origin story matters because it explains the company's current predicament: a technology-first approach that has produced promising drug candidates but no commercial products after a decade of development.

The company operates as a single business segment, focusing on transforming drug discovery through a combination of computational and experimental technologies. This structure reflects its platform-centric strategy, but also highlights its vulnerability: with no approved products, Relay generates minimal revenue—$8.4 million in the nine months ended September 2025, down from $10 million in the prior year period. The revenue decline stems from the termination of the Genentech collaboration, which provided a milestone payment in 2024, and the completion of performance obligations under the Elevar licensing agreement.

Relay's place in the industry value chain is as a drug discovery engine that must ultimately partner with or build commercial infrastructure to reach patients. The company sits between pure-play discovery platforms and fully integrated biopharmaceutical companies, competing against clinical-stage peers like Revolution Medicines (RVMD) and BridgeBio Pharma (BBIO) while facing commercial-stage competitors with established sales forces and profitable franchises. The precision oncology market is growing at 15-20% annually, but Relay has yet to capture any meaningful share, leaving it dependent on its cash reserves to fund operations.

Technology, Products, and Strategic Differentiation

The Dynamo platform integrates computational and experimental approaches to drug protein targets that were previously intractable or inadequately addressed. The platform's core advantage was its collaboration with D.E. Shaw Research, which provided access to the Anton 2 supercomputer and specialized software for protein modeling. This computational power enabled Relay to identify allosteric binding sites —regions of proteins that are distant from the active site but can modulate function. The company used this capability to develop RLY-2608, which management describes as the "first known allosteric, pan-mutant and isoform-selective phosphoinositide 3 kinase alpha, or PI3Kα, inhibitor in clinical development."

Why does this matter? Traditional PI3Kα inhibitors like alpelisib (from Novartis (NVS)) and inavolisib (from Roche (RHHBY)) target the active site and are associated with significant toxicities, including hyperphosphatemia and on-target effects in normal tissues. RLY-2608's allosteric mechanism potentially allows for greater selectivity, sparing normal tissues while maintaining efficacy in PI3Kα-mutated tumors. Interim data from the ReDiscover Trial, with a March 26, 2025 cutoff, showed a 10.3-month median progression-free survival overall and 11 months in second-line patients with PI3Kα-mutated, HR+/HER2- metastatic breast cancer. The combination with fulvestrant was generally well-tolerated in 118 patients, with mostly low-grade, manageable, and reversible treatment-related adverse events.

The pipeline beyond RLY-2608 includes RLY-8161, an NRAS-selective inhibitor for NRAS-mutated solid tumors, and a non-inhibitory chaperone for Fabry disease. The company also maintains one active early-stage discovery program. However, the termination of the D.E. Shaw collaboration in August 2025 means Relay no longer has access to computational power comparable to the Anton 2 supercomputer, which was a useful aspect of its Dynamo platform. This loss could impair the platform's ability to generate new clinical candidates at the same pace, forcing the company to rely on its existing pipeline.

Financial Performance & Segment Dynamics

Relay's consolidated financial results tell a story of a company in transition from broad-based discovery to focused clinical development. Revenue for the nine months ended September 2025 was $8.4 million, primarily from the Elevar Agreement, compared to $10 million in the prior year period from a Genentech milestone. The revenue decline reflects the loss of the Genentech collaboration and the completion of performance obligations under the Elevar deal, leaving the company with no meaningful revenue streams for the foreseeable future.

Net loss for the nine months ended September 2025 was $221.6 million, an improvement from $261.7 million in the prior year period. This $40 million reduction in losses stems from strategic cost-cutting: research and development expenses decreased by $45 million to $206 million, while general and administrative expenses fell by $15.2 million to $44.5 million.

The R&D decrease was primarily due to strategic choices to streamline the research organization throughout 2024 and 2025, cost avoidance from the continued development of lirafugratinib after the Elevar Agreement, offset by increased costs for the ReDiscover-2 and ReInspire Trials. The G&A decrease was mainly due to lower stock compensation and other employee compensation costs, partially offset by costs incurred to obtain the Elevar Agreement.

What does this imply? The company is actively managing its burn rate, but the improvements are marginal relative to its cash position. With $596.4 million in cash, cash equivalents, and investments as of September 30, 2025, management believes it can fund operations into 2029. However, this assumes a quarterly burn rate of approximately $50 million, which is optimistic given that the company burned $62.1 million in operating cash flow in Q3 2025 alone. The actual runway may be closer to 2.5-3 years if trial costs accelerate or if the company needs to invest in commercial capabilities.

The balance sheet remains clean with a debt-to-equity ratio of 0.05, but this financial conservatism reflects necessity rather than choice.

With no revenue to service debt, Relay cannot access traditional financing. The company has relied on equity offerings, including a September 2024 public offering of 32.86 million shares at $7 per share that generated $218.2 million in net proceeds, and a January 2024 private placement of 2.5 million shares at $12 per share that yielded $29.8 million. These dilutive financings have helped fund operations but have also increased the share count without delivering near-term returns.

Strategic Shifts and Partnership Dynamics

Relay's recent strategic moves reveal a company narrowing its focus to conserve resources. In December 2024, the company entered into an exclusive global licensing agreement with Elevar Therapeutics, granting Elevar development and commercialization rights for lirafugratinib (RLY-4008) in FGFR2-driven cholangiocarcinoma and FGFR2-altered other solid tumors. This deal provided $5 million in upfront consideration and $3.4 million for material transfer as of September 30, 2025, offering non-dilutive funding while allowing Relay to focus on RLY-2608 and RLY-8161.

The termination of the Genentech collaboration in January 2025 marked a significant setback. Genentech terminated the agreement for migoprotafib (GDC-1971, formerly RLY-1971) without cause, effective January 7, 2025, resulting in Relay no longer receiving further milestones or payments and discontinuing development of migoprotafib. This loss eliminated a potential revenue stream and validation from a major pharma partner, forcing Relay to shoulder the full development burden of its remaining pipeline.

The restructuring announced in the nine months ended September 30, 2025, involved the involuntary termination of over 70 employees, termination of an operating lease for 46,631 square feet of office and laboratory space at 399 Binney Street, Cambridge, MA, and execution of a new lease for 12,190 square feet of office space at One Kendall Square, Cambridge, MA. This restructuring led to the impairment and write-off of the $2.3 million intangible asset associated with the assembled workforce from the 2021 ZebiAI acquisition. These cost-cutting measures are necessary but signal that the company is scaling back its discovery capabilities at a time when its platform access has been curtailed.

Board appointments of Lonnel Coats and Habib Dable, both former biotech CEOs with launch and commercialization expertise, suggest management is preparing for a potential commercial launch. However, without a partner for RLY-2608, Relay would need to build commercial infrastructure from scratch—a costly endeavor that could accelerate cash burn.

Competitive Context and Market Positioning

Relay operates in a crowded precision oncology landscape dominated by companies with established commercial infrastructure. Blueprint Medicines generated $128.2 million in Q3 2024 revenue from AYVAKIT/AYVAKYT and raised full-year guidance to $475-480 million, demonstrating the revenue potential of targeted therapies. Incyte reported $1.138 billion in Q3 2024 revenue, with its FGFR inhibitor Pemigatinib (Pemazyre) competing directly in the cholangiocarcinoma space where Relay's RLY-4008 was licensed to Elevar. BridgeBio Pharma, with its recent Attruby approval, shows the path from clinical-stage to commercialization, albeit with high burn rates.

Revolution Medicines, like Relay, remains clinical-stage with no approved products, but its focused RAS pathway strategy has attracted significant investment. All competitors face the same high R&D costs and lengthy development timelines, but those with approved products can fund operations through revenue rather than dilutive equity offerings.

What does this mean for Relay? The company is competing against peers with established sales forces, payer relationships, and marketing infrastructure. If RLY-2608 reaches approval, Relay would need to either partner with a larger pharma company—likely on less favorable terms than the Genentech deal—or build commercial capabilities, which could cost $100-200 million annually. The Elevar deal for RLY-4008 suggests management prefers licensing over self-commercialization, but this strategy cedes control and limits upside.

The competitive moat of Dynamo platform, while innovative, is now compromised by the loss of D.E. Shaw's supercomputing access. While Relay retains the intellectual property and methodologies, it may lose the speed advantage that allowed it to identify allosteric sites faster than competitors. This could narrow its differentiation against companies like Revolution Medicines, which also focuses on allosteric inhibitors but has maintained its computational partnerships.

Outlook, Execution Risk, and Critical Variables

Relay's outlook centers entirely on RLY-2608's clinical progression. The company initiated the global Phase 3 ReDiscover-2 Trial in Q2 2025 to evaluate RLY-2608 plus fulvestrant against capivasertib plus fulvestrant in PI3Kα-mutated, HR+/HER2- advanced breast cancer patients previously treated with a CDK4/6 inhibitor. Simultaneously, the global Phase 1/2 ReInspire Trial for RLY-2608 in PIK3CA-related overgrowth spectrum (PROS) began in Q1 2025. These trials represent the company's primary value drivers.

Management guidance is notably absent from earnings call transcripts, but financial statements reveal the company's expectations: "We believe that, overall, while the clinical data from the ReDiscover Trial disclosed to date are preliminary, the data suggest differentiated interim efficacy signals in the specified patient population and support selective target engagement across doses and mutation types with an encouraging interim safety and tolerability profile." This cautious optimism reflects the early nature of the data.

The critical execution risks are threefold. First, Phase 3 trials could fail to replicate Phase 1/2 results, a common pitfall in oncology drug development. Second, enrollment delays could push timeline and increase costs, compressing the cash runway. Third, competitive advances from Incyte, Roche, or Novartis could make RLY-2608's advantages irrelevant by the time it reaches market.

The company's cash position provides some cushion, but the claim of funding into 2029 appears aggressive. With annual burn of $250-300 million and potential increases as Phase 3 trials expand, the runway may be closer to 2.5-3 years. Any need to raise additional capital would be highly dilutive at current valuations.

Risks and Asymmetries: What Could Go Wrong or Right

The primary risk to the thesis is clinical failure. If RLY-2608's Phase 3 data does not show superiority over capivasertib, the company's lead asset would be worthless, leaving only early-stage programs and a compromised discovery platform. This would likely render the stock worthless or force a fire-sale acquisition.

Partnership risk remains elevated. With no major collaborators after the Genentech termination, Relay lacks external validation and cost-sharing. The Elevar deal demonstrates that licensing is possible, but the terms—$5 million upfront for RLY-4008—are modest compared to the hundreds of millions typically paid for late-stage oncology assets. This suggests buyers view Relay's assets as high-risk.

Platform risk is material. The D.E. Shaw collaboration ended in August 2025, and Relay no longer has access to computational power comparable to the Anton 2 supercomputer. If this slows discovery or prevents identification of backup candidates, the company's long-term value proposition diminishes.

On the upside, RLY-2608 could demonstrate best-in-class efficacy and safety, capturing a meaningful share of the PI3Kα inhibitor market. The Eli Lilly (LLY) acquisition of STX-478 from Scorpion Therapeutics highlights the value of allosteric PI3Kα inhibitors, suggesting RLAY could be undervalued if clinical data holds. Additionally, the Dynamo platform could yield additional assets, though this is less likely without supercomputing access.

Valuation Context: Pricing in Perfect Execution

Trading at $7.68 per share, Relay Therapeutics carries a market capitalization of $1.33 billion and an enterprise value of $768 million. The price-to-sales ratio of 159.3 reflects the market's expectation of future revenue rather than current performance. For context, Blueprint Medicines trades at 14.87 times sales, while Incyte trades at 4.18 times sales. Relay's valuation multiple suggests investors are pricing in successful commercialization of RLY-2608 and potential pipeline expansion.

With no profitability, traditional metrics like P/E or EV/EBITDA are meaningless. The company's gross margin is 0% because it has no product sales. The balance sheet shows a current ratio of 19.14 and minimal debt (debt-to-equity of 0.05), but these strengths are overshadowed by the accumulated deficit of $2 billion and return on equity of -41.14%.

The valuation is best understood as an option on clinical success. With $596.4 million in cash, the enterprise value of $768 million implies the market values the pipeline and platform at approximately $172 million net of cash. This is a modest valuation for a Phase 3 oncology asset if the data are strong, but a rich valuation if the asset fails. The stock is pricing in a high probability of success that is not yet supported by registrational data.

Conclusion: A High-Stakes Bet on Platform Productivity

Relay Therapeutics represents a high-risk, high-reward investment in precision medicine drug discovery. The Dynamo platform produced RLY-2608, a potentially best-in-class PI3Kα inhibitor with encouraging early data, but the company faces a narrowing window to demonstrate value before its cash reserves deplete. Recent strategic moves—terminating the Genentech collaboration, licensing RLY-4008 to Elevar, and restructuring operations—reflect management's focus on conserving resources for the Phase 3 ReDiscover-2 trial.

The investment thesis hinges on two variables: whether RLY-2608 can deliver superior efficacy and safety in a registrational trial against established competitors, and whether the Dynamo platform can continue generating viable candidates without the D.E. Shaw supercomputing partnership that was central to its discovery advantage. Success would unlock significant value in the growing precision oncology market, while failure would likely render the equity worthless.

For investors, the critical monitoring points are RLY-2608's Phase 3 data readouts, the rate of cash burn relative to the 2029 guidance, and any new partnerships that could provide validation and non-dilutive funding. The stock's valuation leaves no margin for error, making this a binary bet on clinical execution in an increasingly competitive landscape.